The Financial Reporting Council of Nigeria (FRC), in collaboration with the Lagos Chamber of Commerce and Industry (LCCI) and the Centre for Business Integrity, has embarked on a significant initiative to bolster good governance practices among Nigeria’s Micro, Small, and Medium Enterprises (MSMEs). This collaborative effort recognizes the crucial role MSMEs play in the Nigerian economy, representing 96% of businesses, 84% of employment, and contributing approximately 48% to the national GDP. The FRC’s focus on governance stems from the alarming statistic that over 50% of MSMEs fail within their first year, with over 95% collapsing within the first five years. This initiative seeks to reverse this trend by promoting the adoption of the Small and Medium Enterprises Corporate Governance Guidelines 2024.
The FRC emphasizes that the high failure rate among Nigerian MSMEs is largely attributable to a lack of robust governance structures. While factors such as limited access to funding, inadequate infrastructure, weak market demand, and poor succession planning contribute to business failures, the absence of good governance practices exacerbates these challenges. Sound governance provides a framework for effective decision-making, risk management, and building trust with stakeholders, all of which are essential for long-term sustainability. By addressing the root cause of these failures – poor governance – the FRC aims to bolster the resilience and longevity of these vital economic engines.
The SME Corporate Governance Guidelines 2024, championed by the FRC, offers a practical roadmap for MSMEs to implement effective governance structures. The guidelines provide a framework for transparency, accountability, and responsible leadership, enabling MSMEs to attract investment, manage risks effectively, and navigate the complexities of the business environment. The adoption of these guidelines is expected to transform the MSME landscape, fostering a culture of sustainable growth and contributing significantly to national economic development. The President Bola Tinubu administration recognizes the importance of MSMEs as drivers of innovation and economic transformation, further emphasizing the importance of this initiative.
The partnership between the FRC and the LCCI represents a strategic alliance to disseminate and implement the SME Corporate Governance Guidelines 2024 among LCCI member organizations. The LCCI, with its extensive network of MSMEs, serves as a crucial conduit for promoting the adoption of these guidelines. The collaboration aims to empower MSMEs with the knowledge and resources necessary to implement best practices in corporate governance, thereby strengthening their operational efficiency and fostering long-term sustainability. This partnership is also crucial for fostering investor confidence, as improved governance practices signal a more stable and reliable investment environment.
The FRC’s overarching objective is the developmental growth of MSMEs, recognizing their potential to evolve into future business giants and conglomerates. By equipping MSMEs with robust governance frameworks, the FRC aims to create a more resilient and sustainable business ecosystem. This initiative is not merely about compliance but about building enduring institutions that contribute meaningfully to the Nigerian economy. The partnership between the FRC and the LCCI facilitates improved access to information, capital, capacity building, and networking opportunities, all crucial elements for MSME growth.
The success of this initiative hinges on the collective effort of all stakeholders. The FRC urges all stakeholders, including government agencies, financial institutions, and the MSMEs themselves, to actively support and promote good governance practices. The adoption of the SME Corporate Governance Guidelines 2024 is not a mere formality but a crucial step towards building a robust and sustainable MSME sector in Nigeria. It is a call to action for a concerted effort to transform the MSME landscape, fostering a culture of ethical business practices and responsible leadership, and ultimately contributing to the economic prosperity of the nation. By emphasizing the importance of strong governance, the FRC is laying the foundation for a more dynamic and resilient MSME sector capable of driving innovation and economic growth.
